Asset Finance

Asset finance is frequently related with the acquisition of equipment (or comparable high-cost items) for a firm. This sort of financing is employed by organisations that require or have the chance to grow their business but do not have the funds on hand or desire to spread the expense over a longer period of time.

In other circumstances, a company can use its own assets – such as machinery or cars – as collateral for a loan from an asset finance provider.

Asset finance is a sort of flexible credit agreement that allows organisations to access new assets without having to purchase them completely. It can also be used to extract cash from the value of current business assets.

Asset finance allows you to acquire new equipment such as machinery or automobiles through a hire arrangement with the opportunity to purchase the asset at the conclusion of the contract. The following are some examples of company asset financing:

Apply for asset finance online

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How does it work?

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A member of the team will be in touch to collect some basic information. This helps us understand the type of funding that would best suit your business.

We find the best funding for you

We use the information you provided to source the best funding options for you and your business using our panel of over 250 lenders.

We present your options

We’ll then present you will all of the funding options available to you and give you time to decide which one you would like to proceed with.

What can be financed?

Hard assets

Hard assets

Office furniture, machinery, equipment, cars, and buildings are examples of hard assets. These larger things, unlike soft assets, have a resale value at the end of the purchase term.

Soft assets

Soft assets

Computer software, security equipment, materials, fixtures, and fittings are examples of soft assets.

Liquid assets

Liquid assets

Liquid assets are assets that appear on your balance sheet but can be quickly converted to cash.

How long can asset finance be used for?

How long can asset finance be used for?

Asset finance is typically utilised by firms for one to seven years, giving them time to return the asset purchase cost at the agreed-upon interest rate. Asset-based financing can be used for more than seven years on particularly expensive assets.
Businesses can determine how much time they need to repay their loans using this sort of financing. The period of asset financing will also be determined by how long the asset will be used and the lender’s repayment criteria.

Why should you use asset finance?

Asset finance can be utilised as a short-term funding solution to help a company enhance cash flow and pay day-to-day expenses. There are numerous advantages to employing asset-based financing. Asset finance is used by many firms to assist pay for expenses such as staff wages and supplier invoices, as well as to support expansion ambitions. It’s a popular option since it’s safe and flexible; after all, you’re borrowing money against assets you already own.

Asset finance, on the other hand, is employed by organisations that need to replace or upgrade their existing equipment. Both asset financing options help organisations enhance cash flow and save money in the long run. Any sort of UK business can use it.

Asset finance is prevalent among companies in many industries. Asset finance offers a variety of advantages to firms as a flexible, low-risk lending option:

How does it work?

Asset finance explained in simple terms, works by lowering the upfront costs of purchasing new equipment or machinery for a company. Rather than requiring a firm to acquire an asset outright, an asset lender will typically purchase the asset and charge the business a monthly fee for the duration of the agreed period.

There are many advantages of asset finance as noted above, but it’s also recommended to look at both the advantages and disadvantages before committing to an agreement.

Your monthly payments will vary depending on the type of agreement, value of the asset, option to purchase, credit rating and more.

Speaking with a finance broker about what asset finance solutions, borrowing options and types of financing are available will always make the process smoother and more transparent. There are many different finance products available, researching what’s available to you with help you to understand which way works best for your business.

A lot of businesses are also unaware that one of the advantages of asset finance is you can look at asset refinance, simply refinancing your current agreement. Asset-based lending has become and very popular way of purchasing business equipment, avoiding the need of a lump sum payment. The finance agreement spreads the cost over a fixed term, such as car financing with a hire purchase agreement. Depending on the assets you’re looking to finance, funding options will be tailored on an individual basis, fitting the needs of t the business. Finance and leasing assets is usually classed as secured loans, as the agreement is fixed against an asset of value, such as machinery or a van.

Short-term asset finance allows businesses to obtain the assets they require without sacrificing cash flow. Staying ahead of the competition is critical for business success, but purchasing commercial equipment, trucks, or machinery can be prohibitively expensive.

As a result, numerous alternative lending companies provide business asset loans as a method for SMEs to invest in cutting-edge equipment without having to worry about their cash flow. Investing in new assets may be more affordable than you think in any industry, including building, manufacturing, logistics, and printing.

In most circumstances, the cost of equipment can be spread out throughout the lifetime of the purchase. Hire purchase and equipment leasing are two common short-term asset finance alternatives. Operating leases are another type of asset finance, but you don’t get to keep the equipment once the rental period is up. Asset refinancing, on the other hand, allows you to free up capital held in existing assets.

Does my business qualify for asset finance?

Does my business qualify for asset finance?

Asset finance is only available to UK-based limited companies with a turnover of more than £10,000. The proceeds from the asset loan must only be utilised for commercial purposes.
With so many asset finance options available, picking the correct one can be difficult. Smart Funding Solutions can assist you in navigating the asset financing landscape and determining the best choice for your company’s needs.
There are a number of asset finance companies to pick from, and you’ll want to see which one offers the best conditions for your company. It can be beneficial to have commercial finance brokers on hand to go over the various things to consider before making a decision, which is where we can assist. With asset-based lending, there are a few different ways to look at financing an asset. Hire purchase, contract hire and finance lease are all common ways of achieving funding. Lenders will look at your business accounts, business insights such as financial accounts and credit score when deciding if they’re happy to at funding options for you.
If you’re a sole trader, you might find capital solutions for asset-based lending difficult to achieve. However, that’s not to say funding is unachievable, you may just need to find an alternative route.

What are the tax benefits of asset finance?

On your balance sheet, leasing an asset is shown as a monthly expense rather than an owned asset. Depending on how your organisation operates, this may be a tax-efficient accounting strategy. Service plans, breakdown coverage, and other insurance aspects are also available as part of leasing alternatives.
You won’t have to worry about high maintenance expenses or potential downtime if you have such coverage. Consult your accountant to determine the appropriate tax treatment for your company.

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